Herman Miller, Inc. Wednesday announced results for its first quarter ended September 3, 2016. The quarter included 14 weeks of operations as compared to a standard 13-week period. The additional week is required periodically in order to more closely align Herman Miller's fiscal year with the calendar months.
Net sales in the quarter totaled $598.6 million, an increase of 5.9% from the same quarter last fiscal year. New orders in the first quarter of $595.6 million were 5.7% above the prior year level. On an organic basis, which adjusts for foreign currency translation, dealer divestitures and the impact of an extra week of operations in the quarter, net sales and orders in the first quarter increased 1.5% and 2.5%, respectively, from the same quarter last fiscal year.
Herman Miller reported net earnings of $0.60 per share on a diluted basis in the first quarter, reflecting a 7% increase compared to diluted earnings per share of $0.56 in the same quarter last fiscal year.
Brian Walker, Chief Executive Officer, stated "Despite uncertainty in the global macro-economic environment, we were pleased that our ELA, Specialty and Consumer businesses each delivered strong organic order growth for the quarter. While order levels in the North America segment were softer than expected at the beginning of the quarter, they showed significant improvement toward the end of the period, reflecting the project-based nature of the contract industry. As we look ahead, we are encouraged by the level of project opportunities and customer interest we see, and are well-positioned with a strong new product pipeline and highly trained sales force to win business. With a focus on expanding our entire business to new channels and markets over the past several years, we have built a differentiated multi-channel capability that, combined with our design and innovation leadership, uniquely positions us for growth by serving an expanded range of customer audiences around the globe."
First Quarter Fiscal 2017 Financial Results
*Items indicated represent Non-GAAP measurements; see the reconciliations of non-GAAP financial measures and related explanations in the supplemental data file available for download at http://www.hermanmiller.com/about-us/investors.html. A copy of this supplemental data file has also been included with the earnings press release filed on Form 8-K with the Securities and Exchange Commission.
Jeff Stutz, Chief Financial Officer, noted, "While sales this quarter were slightly lower than we anticipated, we delivered earnings within the range we expected through operating efficiencies from lean initiatives and strategic sourcing, along with well-managed expenses. Our results demonstrate the balanced nature of our business model, with continued strength in order entry within our ELA and Specialty segments helping to offset a relatively slow start to the period in North America. We were also very pleased to see further improvement in our Consumer business segment, which posted year-over-year growth in sales and orders. This marks an encouraging sign that the actions we have taken to improve the performance of that business in recent months are gaining traction."
Consolidated gross margin in the first quarter of fiscal 2017 totaled 38.4%, representing a 10 basis point improvement over the level reported in the same quarter of last fiscal year, despite pressure from commodity costs.
Operating expenses in the first quarter were $173.6 million compared to $161.7 million in the same quarter a year ago. This represented a year-over-year increase of $11.9 million, the majority of which related to the impact of an extra week of operations in the quarter, as well as spending on new product launch and marketing initiatives, and pre-opening costs related to new Design Within Reach studios.
Herman Miller's effective income tax rate in the first quarter was 32.0% compared to 33.6% in the same quarter last fiscal year.
The company ended the first quarter with total cash and cash equivalents of $65.1 million. Cash flow generated from operations in the first quarter was $30.2 million compared to $33.3 million in the same quarter last fiscal year.
Segment Sales and Orders Results
The following tables summarize reported and organic segment sales and orders for the first quarter of fiscal 2017:
Second Quarter Fiscal 2017 Guidance
Looking forward, Herman Miller expects net sales in the second quarter of fiscal 2017 to be in the range of $580 million to $600 million. On an organic basis, adjusted for the impact of a dealer divestiture, this forecast implies sales growth of approximately 2.5% over the second quarter of the prior year at the mid-point of the range. Diluted earnings per share in the quarter are expected to range between $0.52 and $0.56 per share.